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1. (60%) Consider a consumer has an utility function is U =3x1 +362 . The budget constraint is mm + 19230 = m. (A) (10%)
1. (60%) Consider a consumer has an utility function is U =3x1 +362 . The budget constraint is mm + 19230 = m. (A) (10%) Derive the demand functions of x; and am (there are two cases depending on the prices of the two goods). (B) (10%) Let p1 = 1, p2 = 1, and m = 10. Find the optimal choice (xixg) and his utility level. (C) (10%) Now p1 = 2, p2 = 1, and m = 10. Find the optimal choice (x1*,x:) and his utility level. (D) (10%) As in parts (B) and (C), p1 increases from 1 to 2. What is the compensating variation of this price change? (E) (10%) As in parts (B) and (C), p1 increases from 1 to 2. What is the equivalent variation of this price change? (F) (10%) Compare the compensation variation in (E) and the equivalent variation in (F). Which one is greater
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